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In recent years, venture capitalists (VCs) have become the new-age banks for entrepreneurs. And while enough pearls of wisdom have done the rounds about how entrepreneurs need to choose right people and maintain a transparent relationship, it's easier said than done.

In fact, Alan Rosling, former executive director (the only foreigner on the board) of Tata Sons and co-founder of Kiran Energy, has a strong opinion about the Indian VC community.

The entrepreneurial eco-system has had a "profound" positive impact on the business landscape of India and it's unfair to criticise it as being patchy, spotty, imperfect and immature, Rosling said at a talk in Mumbai a few weeks ago. While he admits that founders need to be more mature, "there is immaturity among VCs" as well.

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"Many of the entrepreneurs present business plans that wouldn't pass muster in the US or even here," he said. "We have seen examples of terrible corporate governance among founders. Probably, the most publicised one has been Housing.com. But founders are founders, right?"

Rosling went on to explain: "Founders are people who must have something wrong in their personality for wanting to take on this difficult task of being an entrepreneur. That is more difficult than having a job somebody pays you for with certainty. As a result, founders will always take risks and behave strangely," he said.

The VCs, on the other hand, have no such excuse. In fact, he says, many of them have little to no experience of running a business. "If your experience has been Harvard Business School (HBS) and Goldman Sachs, understanding what a founder is going through is not something that comes naturally to you [the VCs]. And of the hundreds of VCs in this town, most of them have backgrounds that are either IIM, IIT, Goldman Sachs, McKinsey, rather than being a founder," said Rosling, who is an HBS alumnus.

While the VCs' duty is to ensure governance, challenge, constrain, restrict, and, at times, saying 'no' to entrepreneurs, according to Rosling, they also have to support, mentor and work with the people they have invested in.

Get original

Blume Ventures founder Karthik Reddy, who led the discussion with Rosling, spoke about the copycat syndrome among Indian VCs. "Clearly, the venture-led eco-system is influenced by the US,' he said.

"Most of the folks, including myself are from the US. So, our learnings are from that eco-system, in terms of what works and what scales. In fact, my biggest criticism of Indian ventures is that we keep accusing founders and entrepreneurs of copycat model, but the biggest culprits are the VCs. We copy the model as it is [from the US] and then we are forced to reflect on whether it is the perfect model for India."

Upping the EQ

Reddy also felt that there was a need for VCs to cultivate empathy towards their investors. "I don't think it's about VCs being good or bad guys. It's about our ability to empathise with them [the founders] and to know what they are going through. So, I have actually rapped some of my colleagues on the knuckles for something they may have said incorrectly on email because if you are on the other end, you would know how bad you will feel reading that," he said.

Reddy pinned it down to a change where investors needed to understand that if ever their entrepreneur made a mark, he (the entrepreneur) would be the king/queen of the jungle. "We are riding on their backs. This awareness hits people very late," he said.